Supermarkets are threatening the future of wine suppliers warns Sir John Hegarty

 

Sir John Hegarty

Sir John Hegarty: standing up for wine suppliers

Supermarkets should look to work more profitably with their wine suppliers, warns Sir John

Britain’s biggest supermarkets are in danger of “screwing” wine suppliers so much the market is no longer “sustainable” was the dire warning laid down this week by advertising guru and wine producer, Sir John Hegarty.

Speaking at this week’s Wine & Spirit Trade Association conference Sir John Hegarty said the major supermarkets were in danger of “killing the goose that laid the golden egg” in the way it treats its wine suppliers.

Sir John, who founded the Bartle Bogle Hegarty advertising agency and has been responsible for a number of ground breaking advertising campaigns, said he worked alongside many Languedoc producers, where he owns a winery,  that are struggling to make a living and were “taking all the pain and none of the gain”.

It was surely short termism in the extreme for supermarkets to continue to erode margin from the suppliers they ultimate rely on to sell their wine, argued Sir John.

“If I was a retailer I would be very worried,” he said. “This is not a sustainable business model. We have to find a way of rewarding the producer.”

He predicted more and more producers will look to go direct and cut out the middle men “if they are not adding value”. “We are seeing this in other industries as well.”

Sir John claimed  the country’s biggest supermarket chains would be better served facing up to the brand and identity issues they face following the impact of the major discounters on the retail sector.

“I think Sainsbury’s and Tesco are in big trouble,” said Sir John. “Those brands need to do something radical to change.”

The big issue they face, he said, is being sucked in to the middle ground that is being squeezed out of all business sectors. Sir John argued anyone trading in the dreaded middle ground was now “dead” and that the big business success stories would come from those trading in the value, discount sector or the luxury, added value sector.  “There is no future in the middle market.”

“The supermarkets are losing their power,” claimed Sir John.

Advances in digital technology continue to turn industries and the way we behave on their heads. “We are living in an incredibly disruptive era,” said Sir John.

The challenge for all businesses is to determine which market you want to be in, understand what you and your brand stands for and then work out how you can get in to “people heads”  -  the most valuable piece of real estate in the world , said Sir John.

 

Readers' comments (4)

  • Well said Sir John, the UK supermarkets are now at last reaping what they have sown for many years i.e. using wine as a 'loss leader' to produce foot fall in their stores and exploiting the fact that the wine industry is an agrarian business that can be played off one supplier against another but with no interest in building mutual long-term relationships. Have we not heard this from other UK agricultural suppliers too?

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  • Good article. But some questions are left unanswered.

    1) Does anyone really think the Supermarkets care?

    2) The Supermarkets are the wine industry in the UK controlling circa 80% of the market. I haven't seen any evidence that they are losing market share, so the point about them losing power is based on what evidence?

    And lastly,
    3) Can anyone actually tell the difference between B1 and B2 in the TV show Bananas in Pajamas?

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  • I agree totally with Sir John. This is the first sensible view point I have seen in any wine publication for some considerable time.

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  • It is pleasing to see these comments made in public. They are constantly made by the industry out of earshot of the buyers, but no one wants to say it out loud. The UK supermarkets in particular have used a locust mentality for wine for many years, however, as the industry has been in surplus supply for the same period, there has always a new field to strip bare (brand by brand rather than region by region). They have been able to do this as they were the preferred and most efficient route to market. In the new paradigm of the technology age and low margin discounters, the supermarkets may find that thy are no longer the preferred option for an industry struggling for cash flow, margin and effectively survival..

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